Decision on Michigan electric choice rule expected Friday

Michigan Public Service Commission expected to take up controversial location requirement at public meeting

LANSING — The state's energy regulators plan to decide Friday whether to impose a rule that would require suppliers that sell electricity in Michigan's deregulated market to either build their own power plants or buy power generated within Michigan.

The Michigan Public Service Commission said it plans to announce its decision at a meeting Friday near Lansing. An agenda has not yet been finalized, but a commission spokesman confirmed the order is planned for this week.

No details have been released about how the commission will rule.

At issue is a section of Michigan's new energy law, adopted after lengthy negotiations at the end of the last legislative session in December, that deals with electric reliability. Michigan allows 10 percent of its electric customers to buy power from alternative energy suppliers, which typically don't produce their own electricity and instead buy and resell it to their customers. Customers in the so-called electric "choice" market largely include school districts and large industrial companies that need large amounts of electricity and report cost savings buying from a supplier instead of Detroit-based DTE Energy Co. or Jackson-based Consumers Energy.

Some choice customers and lawmakers, including state Rep. Gary Glenn, who leads the House's energy committee, believe the public service commission appears poised to adopt a rule requiring those alternative energy suppliers to either generate their own power or buy it from utilities that already generate electricity in Michigan mainly, DTE and Consumers.

Lawmakers "deliberately removed this contentious language and in doing so, a compromise was reached. The final language clearly allows (alternative suppliers) to use any resource allowed by MISO to meet capacity obligations without reference to local resources," wrote state Reps. Chris Afendoulis, R-Grand Rapids Township, and Rob VerHeulen, R-Walker, in a July filing to the public service commission. "We have strong concerns that the imposition by the Commission of any requirements on (suppliers) in excess of those MISO requires of load serving entities, violates the legislative intent of (the law) and will place a significant additional burden on schools and businesses in our districts and all across Michigan."

DTE and Consumers have countered that it is difficult for them to plan for Michiganders' electricity needs if customers switch between regulated utilities and the choice market. The energy laws require utilities and alternative suppliers to demonstrate that they have enough power owned or under contract to meet demand for electricity. Alternative energy suppliers currently can buy power from any source within the coverage territory of the regional grid operator, known as the Midcontinent Independent System Operator Inc. MISO serves portions of multiple states.

Patti Poppe, CEO of Consumers Energy Co., said she believes what the commission is doing is entirely legal. She acknowledged the state Legislature took out a section in the energy bill related to the "local clearing requirement," but it left another section in that the commission is using to craft its order.

"Our position is we want to follow the law," Poppe said. "We think there is some flexibility there" in how to interpret the energy bill to comply with MISO rules.

While MISO has stated the past two seasons that the 15-state region, which includes Michigan, has more than an 18 percent reserve margin of electricity over peak daily demand, Poppe said she is concerned about electric capacity in the future.

"We want adequate resources in Michigan, but supply is shrinking," Poppe said, adding that Consumers plans to shutter coal-fired power plants that provide 950 megawatts of power and replace them with 500 megawatts.

Glenn, a Republican from Midland County's Larkin Township, points to a filing by the public service commission's staff in May advising against adopting such a rule. He wants commission staff or the attorneys who filed the letter on their behalf to testify before the House energy committee, which they have not done to date.

He also declined commission Chairman Sally Talberg's request to testify before the House energy committee, saying she would not have been able to discuss specific aspects of the case until a decision was reached and he wanted to discuss substantive issues.

Talberg prepared written testimony to read at an energy committee hearing Tuesday, but the meeting adjourned due to time constraints before Talberg — who Glenn scheduled last among the list of speakers — was able to speak. She wrote in her remarks that she would have had "no restriction" on her ability to testify before lawmakers.

"The requirement in the new energy laws that all electric providers demonstrate to the MPSC that they have adequate capacity four years into the future was one of, if not the most, contentious issue during the legislative debate," Talberg wrote, according to a copy of her prepared remarks provided by the commission.

"Specifically, there is the issue of whether and how much of an electric provider's supply arrangement needs to come from local sources," she wrote. "Controversy around this topic is understandable given the complexity of the law, and the potential impact on reliability, rates and the electric choice market."

She said the commission is "committed to faithfully implementing the spirit and letter of the new law."

Her remarks indicate that she would have told the committee that a decision was expected Friday. Glenn planned to hold another hearing Sept. 19, during which it was anticipated Talberg would speak.

"I do expect her to comment, after the fact. But at that point, the Legislature will have no more leverage," said Glenn, who added that he wanted his committee to influence debate before a decision was reached.

"By doing it Friday," he said, "they do foreclose any opportunity for us to hear further testimony before they issue the final order."